Government unveils package to support Island through winter months

Wednesday, 24 August 2022

Electricity prices will be capped until 31 March 2023 as a major part of a comprehensive package of Isle of Man Government support aimed at helping Island residents and businesses through the winter months.

Unveiled today by Treasury Minister Dr Alex Allinson MHK, the intervention package arrives amid rising pressure on the cost of living being felt around the globe, mainly from increases in fuel and energy prices.

This broad range of measures will ensure that everyone benefits from some help with living costs this winter, while additional support will target those at a higher risk of food and fuel poverty.

The measures include:

  • Capping electricity prices at their current level until 31 March 2023 for all customers
  • A third round of targeted support payments in December for those in receipt of child benefit and those on low incomes
  • Capping bus fares at a maximum of £2 per journey for a three-month trial from 1 November 2022
  • Accelerating an £8 million programme to improve energy efficiency in homes.

Electricity prices capped at current level until 31 March 2023

Volatility in energy markets has seen a surge in the cost of fossil fuels since the Russian invasion of Ukraine in February.  The majority of the Island’s electricity is generated from gas, and global price rises mean that Manx Utilities would have needed to increase tariffs by a minimum of 70% this autumn.  This would have seen an increase to the average household bill of around £500 a year.

After consultation with Manx Utilities, and consideration of the wider impact on the Island’s people, businesses and economy, the Council of Ministers has directed Manx Utilities to freeze the unit cost of electricity to customers at current levels until 31 March 2023. 

For those on the domestic and commercial tariffs this means electricity will remain at 22 pence per unit into next spring.  Without intervention by the Isle of Man Government, Manx Utilities has advised that prices would have needed to rise initially to 37.4 pence per unit from 1 October 2022.

With the daily standing charge for a connection to the grid also frozen at its current rate, Isle of Man residents and businesses are likely to pay some of the lowest electricity prices in the British Isles this winter following Government intervention.

Subject to approval at the September sitting of Tynwald, the price cap will be funded with a Government loan to Manx Utilities to be repaid over a 20 year period. The total loan may be up to £26 million.

Minister Allinson said:

“The Council of Ministers has explored a number of options to determine the best way to support our Island over what we know will be a challenging winter.  Unlike gas and oil, electricity is used by everyone on the Island, including businesses, meaning all will benefit from this intervention.

“We are shielding households, businesses and organisations from what would have been a sharp and sudden increase in electricity costs of between £16 and £26 million by March next year.  Instead, people will have that money in their pockets this winter.  It is a considerable sum which will help people and businesses to meet rising costs and means this money can circulate in our economy, boosting both consumer and business confidence.

“The aim here is to flatten the curve on the cost of living increases and give households a degree of certainty and time to adjust to what may be a longer term set of challenges. Providing a loan with a 20-year repayment means that the costs of record electricity prices expected this winter can be factored into bills over a much longer period, cushioning consumers from what would be, for many, crippling price rises.”

Additional support payments for those at higher risk of food and fuel poverty

Government is also providing support for those at a higher risk of fuel and food poverty this winter.  A second round of £2.6 million in support payments has already been announced for October 2022 and a third round will be made in December 2022 to those in receipt of child benefit and certain income-related benefits.  This will provide approximately 3,500 households with support to pay energy bills and approximately 6,000 families with support for living costs. 

Government will work in the coming weeks to determine the appropriate level of support for the December payments, with a further announcement to follow.

Minister Allinson added:

“Whilst we know everyone will feel the increases in the cost of living this winter, those on lower incomes and those with children are particularly vulnerable.  We know those on lower incomes will be harder hit as they spend a higher proportion on food and fuel costs compared to those on higher incomes.

“The Energy Support Payments and the Family Support Payments were designed to target those who are at greater risk of falling into food or fuel poverty and so Government has decided it is right that we repeat some form of payment to these households and families in December.”

Cap of £2 on bus fares to be trialled

In a further move to provide support, a three-month trial of capping bus fares at a maximum of £2 per journey will start on 1 November.  As well as reducing transport costs, the move aims to encourage people to leave their cars at home and switch to public transport, helping to reduce carbon emissions on the Island’s roads. 

The scheme may be extended beyond three months depending on the findings of the trial.

Minister Allinson commented:

“We have seen record fuel prices in recent months and although these have started to come down, the affordability of transport is a concern for a growing number of people, especially when factoring in other rising costs.  We hope this trial will encourage more people to take the bus, with the offer of cheaper journeys for many commuters and no parking fees.”

Accelerating £8 million programme to improve energy efficiency in homes

Work to improve energy efficiency in homes will be accelerated with £8 million in existing funding available.  Materials and equipment such as insulation, LED lightbulbs, draft excluders and thermostatic radiator valves will be available free of charge to those on lower incomes, with the potential to help up to 12,000 households.

In addition, a fund will be created to make the Island’s social housing stock more energy efficient and, subject to Tynwald approval, the Green Living Grant Scheme will be modified to include low-carbon heating alternatives such as air-source heat pumps.  Government will also employ two additional energy doctors to increase its capacity to provide households and businesses with energy saving assessments and advice.

The Minister continued:

“Government is committed to improving energy efficiency in homes and businesses as part of our Island’s climate transformation journey.  Whilst we hope to see energy markets begin to stabilise as we move into 2023, this is looking increasingly unlikely in the short to medium term.  Capping electricity prices will make a difference this winter and buys us time, taking us to spring when electricity use is lower.  As a community we must work together and seize the opportunity to improve energy efficiency in homes in the months ahead.” 

Minister Allinson concluded:

“As we have seen from the differing responses to the cost of living crisis by governments around the globe, there is no single solution, no one right answer. 

“In addition to the measures set out today, we will also monitor developments across the water.  The UK will have a new prime minister at the start of September and measures such as a cut in VAT rates would be reflected here on the Island.

“These are challenging times, but the Council of Ministers believes this package of support will help everyone in our community, including businesses, whilst also specifically targeting those who are likely to feel the most pain.”

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